Having bottomed at two-week troughs of 1.1122, the EUR/USD pair has entered a phase of downside consolidations, with the bears gathering pace for the next move lower below 1.11 handle on the European opening bells.
EUR/USD sold-off into Greece default drama
The spot extends its bearish momentum into a fourth day today, with the downslide accelerated overnight, following the reports of Greece hinting at a default, if its creditors do not agree on debt relief.
The drop in EUR/USD was further fuelled by cross-driven weakness, after the EUR/JPY cross faced double whammy amid Greece headlines on one hand, while broad based Yen strength on the back of the UK election jitters and North Korea headlines, knocked-off the cross over 1 big figure on the other hand.
However, the pair managed to find support ahead of 1.11 handle amid weaker treasury yields, in the wake of widespread risk-aversion, which usually boosts the funding currency status of the Euro.
Looking ahead, the major may come under renewed selling pressure as the European trading gets underway, with the EUR traders reacting negatively to the resurgent Greece troubles, and also on a non-event ECB President Draghi’s speech yesterday.
Focus also remains on the German prelim CPI and US macro releases due later on Tuesday. Fed’s preferred inflation gauge will be closely eyed in the NA session today, followed by personal spending and consumer confidence data.
EUR/USD Technical Levels
Karen Jones, Analyst at Commerzbank notes: “EUR/USD is correcting lower: The Euro is starting to ease back from the 1.1300 November high. We would allow for some further weakness near term. However while dips lower hold over the near term uptrend at 1.1009, the market remains in a longer term bull trend and will need to close below here to question that. “
“Rallies will find interim resistance at 1.1235 ahead of 1.1268 and 1.1300. Above 1.1300, the market has potential to reach the highs from mid 2016 circa 1.1400, however we believe it will struggle here from a longer term perspective. We note the 78.6% retracement lies at 1.1343,” Karen adds.
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